Developing a commercial CCS transportation infrastructure

1. Alastair Rennie, Project Director- Renewables, AMEC. 23rd April 2008 23April 2008 Developing a commercial CCS transportation infrastructure

2. 23April 2008 AMEC at a glance Services focused on designing, managing the delivery of, and maintaining strategic and complex assets • We have annual revenues of over £2.3 billion • We employ 20,000 employees in over 30 countries • Our shares are traded on the London Stock Exchange where we are listed in the Oil Equipment and Services sector • We are a member of the FTSE* 100 *Financial Times Stock Exchange listing

3. 23April 2008 Where we areMain office locations Our 20,000 employees operate from more than 30 countries

4. CCS – US Activities are onshore and EOR led, doing commercial work 23April 2008 AMEC is an engineering company in doing transportation, flood and dehydration systems, pipeline design services, EOR Conceptual Design Services, PM and Engineering Services for new and existing pipelines. The North American market is EOR led to increase revenue, with CO2 as a commodity feedstock. As such it is oil producer led. Re-cycling of the CO2 from the oil is simply good cost management. CO2 is Europe is environmentally led, with the CO2 as a cost burden and integrity of storage as the goal, with any EOR as a bonus. As such it is emitter led.

5. UK CO2 transport workare precursors to business cases IEA GHG R&D studies – Mersey area Distributed Collection and Transmission of CO2 Study Upgrade of CO2 Pipeline Cost Calculation Programmes Yorkshire Forward Regional study Multiple source network and trunk line CO2 collection Pipeline study to geological or EOR storage Economic cost modelling of network CASSEM -Academic/business consortium Pipelines and network study for two proposed CCS locations for potential saline aquifer storage sites Teesside CCS project and others BERR demonstration competition has spurred consideration of transport and storage options, including both pipeline and shipping concepts. A number of companies may be doing more specific work this year 23April 2008

6. 23April 2008 Will it happen? Requires a number of things to happen before we see CO2 transported and utilisation of North Sea and Irish Sea storage • Global political agreements • EU financial and regulatory support – simple EUA value is not enough • Government legislation and financial mechanisms • Agree the regulatory regime, especially H&S of high pressure CO2 and long term storage characterisation • Enabling, by EU or bilateral agreement, the storing of CO2 from another country just to arrive at a position where Carbon Capture and Storage is a long term commercially viable proposition, enabling the • Commitment to capture (the major commercial cost and risk) • Commitment to provide storage or EOR. Some storage has capacity to match sources- mostly a multiple store strategy will be required to match timescales and sizes of sources. • Before finally being able to commit to transport of the CO2

7. 23April 2008 Factors helping implement transport in the EU • It is a relatively small but necessary part of CCS • Identified potential for re-use of existing assets • Good timing for use of low risk storage in the North Sea • Can benefit from shared infrastructure with clustering of sources • Source owners well aware of the low marginal cost in oversizing of pipelines if there is a foreseen larger supply after the initial flow Must stress that without decent volume from a number of sources then transport and storage become expensive

8. Shipping Low capital cost to user High operating cost 3-10 year commitment Another commodity to a competitive transport industry Practical issues around acquisition dominate consenting Interim storage is an additional constraint Flexible but more disruption risk Pipeline High capital cost Low operating costs 10-15 year minimum to plant life commitment Bespoke, improved by networking Slow approval processes Limited capacity variability Rigid asset between a source and a store leads to fewer commercial options High reliability 23April 2008 Shipping and Pipelines – play to commercial strengths, not the distance versus cost diagram

9. 23April 2008 Commercial options for a pipe network • This ignores single source to single store situations – covered by in-house or linear commercial agreements • Covers pipeline networks, including shipped CO2 inputs and outputs • Focus is on earlier configurations of networks - other ownership and commercial arrangements may arise with well established assets and CO2 flows

10. 23April 2008 Network commercial demarcations Common network resources Each piped source Licensed storage separation Injection, monitoring dry/compress measure Pumping, pipes, meters Each final storage asset S Node C D P Shipped CO2 T Port Shared port facilities, export storage Ship Other system- Transfer of all liabilities and payment Ships

11. 23April 2008 Network commercial demarcations Common network resources Each piped source Licensed storage separation Injection, monitoring dry/compress measure Pumping, pipes, meters Each final storage asset S Node C D P Shipped CO2 T Port Revenue from CCS Commitment to CCS Shared port facilities, export storage Ship Other system- Transfer of all liabilities and payment Ships

12. S C D P T Port Ship 23April 2008 Commercial ranges • P • C to S or T • P plus options on D, Port, Ship (service) For simplicity focus on ownership options for P, the shared network • Public or Regulated infrastructure- open access, no market exposure • Shared ownership by sources • Ownership by an independent transport company • Shared ownership by investment stakeholders- sources, transporters, store operators. Could include public bodies.

13. 23April 2008 Common issues facing establishment of a network • Ownership of the CO2 whilst transported • Commitment to CCS by source- • Timing of initial flow, duration, risk of failure to provide CO2 • Peak versus average flow • Initial, stage flow rates, maximum flow Take or pay contract is obviously a partial answer to cover initial capital spend • Storage availability • Timing (decommissioning, proving, work overs), risk of ability to inject at peak rates, total capacity • Alternative storage Avoid liability for failure to store (either flow or retention of CO2) • Transport availability • Unplanned breakdowns and maintenance of the network Agree process for planned outages with sources and stores. Avoid consequential losses to store owner and sources Agree terms for loss of CO2 whilst within the network boundary • Discount rate for a long life asset • Cost of the system is driven more by the cost of capital than capacity

14. 23April 2008 Relative comparisons of main issues

15. 23April 2008 Relative comparisons of main issues

16. 23April 2008 Conclusions • Public ownership is possible because it is a network rather than a single source solution. However this is otherwise unattractive, especially as the network must be developed. • The shared ownership by source interests is, on balance, probably the preferred option. • We would suggest that this may be enhanced by elements of other stakeholders, not least to engage with the public and enable increments of investment to reduce the life time costs of moving CO2 to storage. • We see the provision of the wider scope of CO2 services from source to sink as a good way for us to support emitters to minimise costs and for store owners to earn additional income from their oil & gas experience. It is possible to see how good engineering and good commercial design could build cost efficient networks in Northern Europe.